Luna V Galarrita

TOPIC Duty of fiduciary
:
CITATION: A.C. No. 10662
TITLE: Luna v Galarrita
DATE: July 7, 2015
Those in the legal profession must always conduct themselves with honesty
and integrity in all their dealings. Clients entrust their causes — life, liberty,
DOCTRINE:
and property — to their lawyers, certain that this confidence would not be
abused.
FACTS:
Luna engaged the services of Atty. Galarrita's in filing a foreclosure complaint against Jose Calvario.
The Complaint alleged that Calvario borrowed P100,000.00 from Luna. This loan was secured by a
Deed of Real Estate Mortgage over a parcel of land in Quezon Province. Due to non-payment of the
loan, Luna filed the Complaint praying for payment of the obligation with interest, and issuance of a
foreclosure decree upon Calvario's failure to fully pay within the period.
Atty. Galarrita opted to enter into a settlement with the other party after his formal offer of
evidence. They submitted the Kasunduan (Compromise Agreement) before the trial court. It
provided that Calvario would pay Luna P105,000.00 as payment for his mortgaged land and, in
turn, Luna would cause the removal of the encumbrance annotation on the land title. The trial court
approved the Compromise Agreement.
Upon knowledge of the Compromise Agreement, Luna wrote to Atty. Galarrita that he was
surprised that a plea agreement for compromise agreement was made without his knowledge and
such act was beyond what was discussed. Atty. Galarrita replied that he entered into an amicable
settlement because it is better than winning and asked for understanding since he had not received
any appearance fee for numerous hearings. Luna alleged that the delay in the payment of retainer’s
fee was due to Atty. Galarrita’s negligence in handling the case. Atty. Galarrita explained that the
reason why the case was archived was because he could not attend several hearings for lack of
meal and transportation allowance going to Gumaca, Quezon.
Luna received a letter from one of the heirs of Jose Calvario, Emma C. Tayag, seeking delivery of the
land title. Luna filed an Affidavit-Complaint alleging that Atty. Galarrita has not remitted the
P100,000.00 to date. He prays for Atty. Galarrita's disbarment. Atty. Galarrita prays for the
dismissal of the disbarment Complaint. He argues that he entered the Compromise Agreement by
virtue of a Special Power of Attorney. Also, he added that under the General Retainership
Agreement, Luna shall pay him P4,000 monthly.
ISSUE:
Whether respondent Atty. Galarrita should be held administratively liable for entering into a
Compromise Agreement without his client’s consent, then refusing to turn over the settlement
proceeds received.
HELD:
The Court ruled in the affirmative. The Court cited Rule 1.01of the Code of Professional
Responsibility.
Here, Luna entrusted respondent Atty. Galarrita with handling the case. However, without Luna's
consent, Atty. Galarrita settled this case with the other party. The Special Power of Attorney given
by Luna to Atty. Galarrita does not give the latter the authority to enter into Compromise
Agreement at that stage in trial. The authority given to Atty. Galarrita to enter into a possible
settlement referred only to a possible settlement that could be secured during the preliminary
conference or pre-trial of the case. Also, Luna was not seasonably informed of the execution of the
Compromise Agreement/payment.
Clients entrust their causes — life, liberty, and property — to their lawyers, certain that this
confidence would not be abused. Members of the bar must always conduct themselves in a way
that promotes "public confidence in the integrity of the legal profession."
The Court also cited Rule 16.01 and 16.03 of the Code of Professional Responsibility.
Atty. Galarrita not only failed to promptly inform complainant Luna of the former's receipt of the
P100,000.00 settlement proceeds but also refused to turn over the amount to complainant Luna.
The Court held that any money collected for the client or other trust property coming into the
lawyer's possession should promptly be reported by him.
True, the Code of Professional Responsibility allows the lawyer to apply so much thereof as may be
necessary to satisfy his lawful fees and disbursements, giving notice promptly thereafter to his
client." But this provision assumes that the client agrees with the lawyer as to the amount of
attorney's fees and as to the application of the client's fund to pay his lawful fees and
disbursements, in which case he may deduct what is due him and remit the balance to his client,
with full disclosure on every detail. Without the client's consent, the lawyer has no authority to
apply the client's money for his fees, but he should instead return the money to his client, without
prejudice to his filing a case to recover his unsatisfied fees.
Also, lawyers are not entitled to unilaterally appropriate their clients’ money for themselves by the
mere fact that the clients owe them attorney's fees. They must give prompt notice to their clients of
any receipt of funds for or on behalf of their clients.
The Supreme Court ruled for Atty. Galarrita’s suspension from the practice of law for a period of 2
years and ordered to return the amount received.

Luna V Galarrita

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TOPIC Duty of fiduciary

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